MUMBAI: Jeh Wadia, managing director of GoAir, was holidaying in Australia earlier this month, when news first broke that his airline was being bought out. He says he was rudely woken up one morning by a ?call from his ?Ol? Man??, who wanted to know if they were indeed selling the business.

He assured the senior Wadia that there was no such move. He followed up with categorical statements stating that he was not selling out. Despite his protestations, hysteria over mergers and acquisitions in aviation over the past weeks has grown to a crescendo. In a freewheeling interview with ET, Mr Wadia elaborated on his plans for GoAir and the impact of consolidation in the airspace.

Three major consolidations in the four months have changed the complexion of the Indian airline industry, but any more acquisitions would be stupid, he says. It is much cheaper to grow organically than to acquire an existing airline. It doesn?t make sense to pay to inherit someone else?s losses.

He is clear that more aircraft on the fleet currently mean higher losses. The Mumbai-based GoAir is among the smallest scheduled carriers with a fleet of five Boeing aircraft; three more are leased out to a European company during the monsoon, when demand is low in India. ?The focus is to make the least losses and last out till the scenario changes,? he says.
He hopes that policy changes would allow outsourcing of support services that are vital to keep costs low for low-cost carriers internationally. This, combined with relief on fuel taxes, can make the industry profitable, says Mr Wadia. When the new batch of airlines took off about three years ago, they all believed the policy issues would be put on fast-track, but progress has been slow.

Commenting on the quest for more aircraft in light of an overcapacity situation, he says, ?You can?t ignore the environment and keep ordering new aircraft.? GoAir, which is being funded completely by the Wadia group has plans for a fleet of 18 planes by 2009, which would go up to 35 by 2011.

This is very conservative by Indian standards, since most airlines have drawn up multi-billion dollar aircraft induction plans, for deliveries over the next decade. Mr Wadia says the plan is linked to reality and is not about ?testosterone.?

GoAir tickets cost about Rs 2,600 apiece, but the airline is still about Rs 100 to Rs 200 short of being profitable. The quest for profits sparked a major change in route network in the beginning of this year. It earlier had ?point-to-point? flights across its network, which have now been changed to to a multi-leg strategy.

This means most flights now stop at a third city. GoAir has seen much higher load factors since the switch. A flight on the Mumbai-Ahmedabad-Delhi route for instance, carries passengers who want to go from a)Mumbai to Ahmedabad, b)Ahmedabad to Delhi and lastly, Mumbai to Delhi.
The fare between Mumbai and Delhi is priced lower than competing direct flights. But the combination of the three kinds of passengers has pushed up the load factor, Mr Wadia explained. GoAir also plans to launch three aviation-linked businesses; a maintenance company, a cargo operation and a ground handling outfit.

This bouquet will ensure that the business is hedged. He also plans to step back from his executive position in a few months to hand over the airline operations to a professional CEO. ?It?s very important for family-run businesses to have that degree of separation once the business is up and running,? he says.
source: The Economic Times

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